Case Study 4

Topics: Balance sheet, Liability, Asset, Generally Accepted Accounting Principles, Accounts receivable / Pages: 8 (1950 words) / Published: Apr 7th, 2013
KHF CORPORATION
SEEDS OF DISTRESS
Jim Layton, controller for Kitty (Hawk Food), Inc. (KHF) was under considerable stress as he walked toward the chief executive's office. Marshall Horne, the CEO, was not known to take bad news well. In his hands, Jim held two letters from food suppliers that threatened to cancel KHF's trade credit accounts. KHF had developed difficulties in cash flow such that their payments on the accounts had been late, at best. The suppliers provided normal trade terms to KHF, with a 2% discount for early payment (within 10 days), and a 30 day limit. No purchase limits had been placed on the firm.
KHF had depended heavily on trade credit for the recent expansion of its service area into the Outer Banks of North Carolina. Jim, of course, was ultimately responsible for the firm's financial condition and performance. He fully expected to get a strong reprimand from
Horne.
Mr. Horne was a big, burly man, never really seen without a faded baseball cap on his head. Not the sort of look a CEO might be expected to have. He was rather eccentric, as well, which complicated Jim's interaction with him. Horne had taken the firm from being a small food supplier in Edenton, North Carolina, to a moderate size regional supplier for restaurants throughout the northeastern part of the state. Horne seemed to have a way of appealing to the
"good ole' boy" restauranteur, a personality very prevalent in this part of the state. Horne always had a mind full of jokes to share. Recently, he had somehow convinced the shareholders to vote in a name change from "Swamp Foods" to "Kitty (Hawk Food)." To Jim, the new name was rather silly and he thought to himself that it might even hurt business to have such an absurd title. Horne, however, appeared to be able to promote the humor of the name, and really seemed to enjoy traveling from business to business, picking up new customers. He had been almost solely responsible for the new business recently acquired in
Nag's Head, Kill

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